There is a saying, “It takes one to know one.” I am a convicted felon, former CPA, and former criminal CFO of Crazy Eddie. Today, I teach law enforcement agencies, professionals, and businesses how to identify fraud and train them to catch the crooks. This blog investigates white-collar crime, securities fraud, accounting irregularities, corruption, and other related topics. Accounting irregularities investigated by me are referred to appropriate government agencies as a whistleblower.

Saturday, December 13, 2008

Is there really more white collar crime today? No.

Advice about white collar crime from a convicted felon: A bad economy causes many white collar crimes to float to the surface.

Once, I asked a N.Y.C. police officer assigned to the harbor patrol, why are so many dead bodies are pulled out of the rivers around Manhattan every spring. He explained to me that many of these people did not actually die during the spring. Instead, many of these people really died during the previous winter.

During the winter, if a person is killed and the dead body is dumped into the river or if a person commits suicide by jumping into the river from say a bridge, their bodies will sink to the bottom of the river because the water temperature is cold. When spring arrives, the water heats up and the dead bodies float to the top of the river surface. The harbor police then retrieve those bodies that are also known as “floaters.” Therefore, just because we find dead bodies in the spring, does not mean they died at that time. Instead, they probably died during the winter.

The same principle applies to white collar crime. White collar crime is always around in both good and bad economic times. Such crimes are either less noticed during a good economic climate or more noticed during a bad economic climate, like the situation we face right now. In a relatively good economy, white collar crime is easier to execute and harder to uncover. In a relatively bad economy, many white collar crimes in progress implode upon themselves because they become unsustainable. Bad economies, like warm water for dead bodies, brings many white collar crimes to the surface.

It is unfortunate that the majority of white collar crimes are uncovered because they implode upon themselves, instead of the result of effective work by internal auditors, external auditors, and audit committees. We simply do not have enough adequate effective measures in place, to prevent most white collar crimes. Even when internal controls and checks and balances are present, they are often circumvented by criminals taking advantage of the lack of skepticism of those persons responsible for compliance and oversight.

Worse yet, during a strong economy, our regulators and policy makers often ignore or pay little attention to crime prevention resources and regulations that can actually reduce the amount of white collar crime. Often white collar law enforcement resources are reduced and regulations are watered down, in the name of efficiency and regulatory relief, to promote economic growth.

However, the consequences of such actions become apparent later, as the we enter into a recession. At that time, many white collar crimes implode upon themselves, become known to us, and are reported in the media. By the time we find out about a certain white collar crime, it is too late to undo the damages it caused and return lost money to its victims.

Many of the white collar crimes in the headlines today, were perpetrated for years, before they became known to us. We should measure the occurrence of white collar crime by the dates they were executed, instead of indictments and convictions that follow many years later. The crimes reported today, have roots far into the past. The same can be said about the problems facing our economy today, such as the credit meltdown.

In the mean time, think about the about the recently announced criminal investigation of Bernard L. Madoff and the problems at Freddie MAC (NYSE: FRE).

To be continued….

Written by,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Disclosure: As the cold-blooded criminal CFO of Crazy Eddie, I committed my crimes simply because I could. I took advantage of the gullible trust of my victims and their lack of skepticism.

2 comments:

Anonymous
said...

Mr. Antar, there is an absolutely fascinating 19-page 2005 letter from Mr. Markopolos to the SEC re: Madoff on Clusterstock.http://clusterstock.alleyinsider.com/2008/12/busting-bernie-madoff-one-mans-10-year-crusade

I received an email from a person who wishes to remain anonymous and with that person's permission, I am posting it here:

"The reason that bodies float in the spring is that they decompose due to the higher water temperatures, which produce gases that displace water taken in by the lungs. So a corpse dumped in the winter may stay "refrigerated" at the bottom of the East River until spring.

Your cop friend is not good at physics. Cold water is denser at low temperature (down to 4C and then increases slightly to the freezing point, which explains how ice forms on the surface), so a body is more likely to float in the winter. However, this factor is secondary. A body sinks (in winter or spring) because the lungs fill with water. It rises when it has decomposed sufficiently."

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New Jersey State Assembly Republican Policy Committee (08/17/09)

“White collar crime is more brutal than violence crime. The actions of one or a few corrupt public officials and corrupt businessmen affect the livelihoods of thousands of people. Treat them with the same disdain as we do treat serial killers because white collar criminals are economic predators. We are serial economic predators." -- Testimony of Sam Antar